Bradburn Corporation was formed 5 years ago through a public subscription of ordinary shares. Daniel Brown, who owns 15% of the ordinary shares, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, Daniel Brown approached the Hibernia Bank, asking for a 24-month extension on two $35,000 notes, which are due on June 30, 2011, and September 30, 2011. Another note of $6,000 is due on March 31, 2012, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn€™s cash flow problems are due primarily to the company€™s desire to finance a $300,000 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Hibernia Bank requested financial reports for the last 2 fiscal years.
These reports are reproduced below.

*Cash dividends were paid at the rate of $1 per share in fiscal yeay 2010 and $2 per share in fiscal year 2011.

*Depreciation charges on the plant and equipment of $100,000 and $102,500 for fiscal years ended March 31, 2010 and 2011, respectively, are included in cost of goods sold.

Instructions
(a) Compute the following items for Bradburn Corporation.
(1) Current ratio for fiscal years 2010 and 2011.
(2) Acid-test (quick) ratio for fiscal years 2010 and 2011.
(3) Inventory turnover for fiscal year 2011.
(4) Return on assets for fiscal years 2010 and 2011. (Assume total assets were $1,688,500 at 3/31/09.)
(5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2010 to 2011.
(b) Identify and explain what other financial reports and/or financial analyses might be helpful to the commercial loan officer of Hibernia Bank in evaluating Daniel Brown€™s request for a time extension on Bradburn€™s notes.
(c) Assume that the percentage changes experienced in fiscal year 2011 as compared with fiscal year 2010 for sales and cost of goods sold will be repeated in each of the next 2 years. Is Bradburn€™s desire to finance the plant expansion from internally generated funds realistic? Discuss.
(d) Should Hibernia Bank grant the extension on Bradburn€™s notes considering Daniel Brown€™s statement about financing the plant expansion through internally generated funds?Discuss.

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BRADBURN CORPORATION STATEMENT OF FINANCIAL POSITION MARCH 31 Assets 2011 2010 Plant and equipment (net of depreciation) Inventories (at cost) Accounts receivable (net) Notes receivable Cash $1,449,000 105,000 131,800 148,000 18,200 $1,852,000 $1,420,500 50,000 125,500 132,000 12,500 $1,740,500 Total assets Equity and Liabilities Share capital-ordinary (130,000 shares, $10 par) Retained earnings* Accrued liabilities Notes payable Accounts payable $1,300,000 388,000 9,000 76,000 79,000 $1,300,000 282,000 6,000 61,500 91,000 $1,740,500 Total equity and liabilities $1,852,000 BRADBURN CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31 2011 $3,000,000 1,530,000 $1,470,000 860,000 $ 610,000 244,000 366,000 2010 Sales Cost of goods sold Gross margin Operating expenses Income before income taxes Income taxes (40%) Net income $2,700,000 1,425,000 $1,275,000 780,000 $495,000 198,000 $297,000